Consumer Finance Litigation

Following the Supreme Court’s decision in Spokeo, Inc. v. Robins, 578 U.S. 330 (2016), federal courts have continued to examine what is an injury in fact under the Fair Credit Reporting Act (“FCRA”). On April 4, 2022, the Eighth Circuit provided instructions on remand to dismiss a FCRA class action due to lack of standing in Schumacher v. SC Data Ctr., Inc., --- F.4th ----, 2022 WL 997742 (8th Cir. Apr. 4, 2022). Ria Schumacher applied for a position at SC Data and during the application process answered “no” to a question asking if she had been convicted of a felony. In connection with offering Schumacher a job, SC Data requested she complete an “Authorization for Release of Information” which disclosed that SC Data intended to use a vendor to conduct a criminal background search. The background search returned Schumacher’s prior felony convictions and SC Data withdrew its job offer. She was not afforded the opportunity to explain the results of the background search before SC Data withdrew the offer.

Schumacher filed a class action complaint and asserted three claims under the FCRA. She contended that SC Data violated § 1681(b) of the FCRA by (1) taking an adverse employment action based on a consumer report without first providing the report to her (“adverse action claim”); (2) obtaining a consumer report without providing FCRA-compliant disclosure (“improper disclosure claim”); and (3) obtaining more information than what was disclosed to be sought in the authorization and release form (“failure to authorize claim”). On appeal, the Eighth Circuit ruled that Schumacher lacked standing to pursue any of the claims.

Concerning the first claim, the Eighth Circuit held “[n]either the text of the FCRA nor the legislative history provide support for Schumacher's claim that she has a right under the FCRA to not only receive a copy of her consumer report, but also discuss directly with the employer accurate but negative information within the report prior to the employer taking adverse action.” While the court acknowledged that Schumacher did not receive a copy of the report prior to SC Data’s rescinding the job offer, it noted that she did not contend that the report was inaccurate and also that SC Data wrote on the report the reason for rescinding the offer – Plaintiff’s prior felony convictions. The Eighth Circuit explained that one of the FCRA’s goals is to protect against the dissemination of inaccurate information and declined to read into the FCRA the right to explain to a prospective employer negative but accurate information in advance of the employer’s adverse employment action.

Regarding the improper disclosure claim, Schumacher alleged several defects with SC Data’s disclosure that it would procure a consumer report for employment purposes. Those defects included, among others, small font size, inclusion of non-disclosure related information and lack of use of the express term “consumer report.” The court rejected this claim for lack of standing and explained that while Schumacher had alleged a “panoply” of defects with SC Data’s disclosure, she had failed to allege any claim of harm and thus had failed to establish a concrete injury caused by the alleged improper disclosure.

Finally, addressing the failure to authorize claim, the court rejected Schumacher’s argument that she did not authorize SC Data to obtain a consumer report. Specifically, the court found “it [was] indisputable that Schumacher authorized SC Data to obtain a type of consumer report documenting her criminal history” and the report, which contained information concerning her criminal history, was a consumer report as defined in § 1681a(d)(1) despite not being specifically titled as such. The court held that Schumacher had consented to the criminal background check and had “failed to plead an intangible injury to her privacy that is sufficient to confer Article III standing.” The Eighth Circuit remanded the case to the district court with instructions to dismiss for lack of jurisdiction.

Courts will continue to develop the contours of Article III standing under the FCRA. While many plaintiffs can plead injury in fact, defendants should be diligent at the outset of a FCRA case in assessing whether a plaintiff has pled an injury in fact associated with an alleged FCRA violation that is sufficient to confer standing.

Written by Samuel A. Morris and Alan D. Leeth.